M&A boom being driven by strategics

Over the past couple years, private equity activity hasn’t fluctuated too wildly. PE firms that say they’re trying to invest are walking the walk, according to the numbers. Both graphs below show quarter-over-quarter consistency in PE deal flow and value, despite questions around deal sourcing. Deals are out there, and to a large extent, they’re still happening.

Where you see the big, market-shifting moves in the M&A landscape, however, is with strategics.

Take the chart below from our latest M&A Report, which you can access for free by clicking here or on the images below. Sponsored-backed mergers and acquisitions have been fairly consistent in number since the start of 2013, though their percentage of overall activity has seen noticeable fluctuation driven by swings in corporate deals.

Source: PitchBook

Another example relates to PE-backed exits, particularly in recent quarters. In the graph below, you’ll see PE’s 2Q sales of portfolio companies to corporate acquirers raked in an enormous $150 billion, while the 1H tally was over $236 billion (up 80% YoY, up 246% from 1H 2013). Capital exited through SBOs, on the other hand, has seen calmer fluctuation.

Source: PitchBook

The strategic-led nature of this M&A boom is one of the key differentiators between today’s climate and that of 2007, when PE firms were leading the charge of mega-acquisitions. So how long will this continue? That may depend on if stock prices correct in the near future.

Also hanging over the industry’s head right now is an expected hike in interest rates. And while the subsequent effect may not be drastic throughout the rest of 2015, any abrupt changes could lead to a decline in strategic sales, and perhaps a bump in secondary buyouts.